Climate-linked bonds, issued by governments and supranational organizations, are pivotal in advancing towards a net-zero economy. These bonds adjust their payoffs based on climate variables such as average temperature and greenhouse gas emissions, providing investors a hedge against long-term...

Will ageing societies in Europe lead to a new savings glut? To address this potential consequence of demographic change, we assess the relationship between population ageing and safe assets in the euro area, using data from the Eurosystem's Household Finance and Consumption Survey (HFCS). Our...

This paper focuses on the estimation and testing of multiple breaks that occur at unknown dates in multivariate long memory time series regression models, allowing for fractional cointegration. A likelihood-ratio based approach for estimating the breaks in the parameters and in the covariance of...

Using Credit Default Swaps (CDS) on sovereign bonds, we investigate whether US sovereign default risk is a greater driving factor of domestic interbank funding risk than domestic sovereign default risk across the five Libor counties including Canada and Australia. We use equivalent-country...

Using supervisory data of alternative investment funds investing in bonds, I exploit the COVID-19 crisis to examine the effectiveness of redemption restrictions from a financial stability perspective. First, I find that redemption restrictions reduced outflows during the March 2020 market...

The objective of this article is to present the results of an analysis of how the form of activities of EU banking groups affected their decisions to purchase non-euro area EU government bonds during the COVID-19 pandemic. The dataset consists of the portfolios of government bonds (including...

Do sovereign credit ratings take into account physical and transition climate risks? This paper empirically addresses this question using a panel dataset that includes a large sample of countries over two decades. The analysis reveals that higher temperature anomalies and more frequent natural...

Based on an analysis of changes in the yields of German government bonds, we propose a simple model for the term structure of interest rates and show empirically that this model with two parameters (relating to the interest level and slope of the term structure) fits empirically well the data...

We employ a cross-quantilogram approach to assess relationships between quantiles of stock returns and sovereign yields, in the U.S. and Germany, in the period 1990-2024. Specifically, we focus on the lowest 5% quantile of stock returns and the highest 5% quantile of bond returns, providing...

We document that compared to all other investor groups investment funds exhibit a distinctly procyclical behavior when financial-market beliefs about the probability of a euro-related, institutional rare disaster spike. In response to such euro disaster risk shocks, investment funds shed...

This study examines the relationship between sovereign spreads and banks in terms of risk transmission, using the seven largest Italian banks as a sample over the period from 2003 to 2023. Our objective is to quantify and compare volatility spillovers, and to investigate whether bank-specific...

This article examines U.S. Treasury securities market functioning from the global financial crisis (GFC) through the Covid-19 pandemic given the ensuing market developments and associated policy responses. We describe the factors that have affected intermediaries, including regulatory changes,...

How do financial markets respond to anticipated climate-driven wildfire risk? Using high-resolution meteorological forecasts, land use data, and U.S. municipal bond spreads, we find that municipalities facing greater future wildfire exposure already incur higher borrowing costs: A one standard...

In recent years, because of the 2008 financial crisis and the evolution of the sovereign debt markets, there has been a significant increase in interest in understanding the factors that determine the risk premium, becoming a key indicator of the financial stability of countries, and a measure...

We assess how countries’ fiscal policies during COVID-19 pandemic influenced the effects of the Pandemic Emergency Purchase Programme (PEPP) on sovereign bond Option-Adjusted Spreads. Using a cross-sectional regression model with country and time-fixed effects, we analyse a sample of 1,368...

The paper quantifies the impact of the outbreak of the Russo-Ukrainian war on sovereign bond yields for 58 countries. Our findings based on event study methodology and multivariate cross-sectional regression analysis highlight the salient role of trade channel in shaping the markets' reaction to...

Government bond markets play a critical role in the smooth functioning of the financial system, in the conduct and transmission of monetary policy and in the economy as a whole. Maintaining resilient government bond markets is fundamental for policymakers and authorities. This note examines the...

The excess levels of investor participation coupled with irrational behaviour in the South African bond market causes excess volatility, which in turn exposes investors to losses. Consequently, the study aims to examine the effect of market-wide investor sentiment on government bond index...